Productivity Growth and the Actuarial Balance of the Social Security Program
16 Pages Posted: 19 Dec 2001
Abstract
With the baby boom generation reaching retirement age, labor force growth is projected to slow significantly, to a level indicating that almost all future economic growth will be due to growth in productivity. This article uses the SSASIM policy simulation model to evaluate the effects of different assumption values for the productivity growth rate on the actuarial balance of the Social Security program. It concludes that, while the recent sharp increase in productivity growth will improve the financial standing of the Social Security program, continuous levels of unprecedented growth in total productivity would be needed for the program to be able to meet all of its promised expenditures. Therefore, economic growth alone, even in a "new economy," appears to be unable to "solve" the projected funding shortfall of the Social Security program.
Note: The PDF also contains the fulltext of another November 2001 EBRI Notes article abstracted on SSRN: "Number of Americans With Job-Based Health Benefits Increased in 2000 While Uninsured Declined."
Keywords: Labor productivity, Social Security financing
JEL Classification: H55, J24
Suggested Citation: Suggested Citation